Sunday, 16 September 2012

Where Do We Go From Here?

Last Thursday, Ben Bernanke sang, and the global economy danced to his tune.  After the Fed’s announced the guarantee of monetary easing for -- let’s face it -- as long as it now pleases, gold futures surged to a high of almost seven months.

Then today, the yellow metal decided to rest down $14.70 for a close of $1758.50 per ounce.  Markets go up; markets go down.  Without a close look at what’s happening at a particular stock or commodity, it’s easy for the ordinary investor to become over-optimistic when that stock or commodity flies up, or over-pessimistic when it retreats. 

Positive-Pullback

But we know what’s happening with gold.  A printing press without a slow gear sports a built-in invitation to debased currency and, ultimately, inflation.  It’s only natural, therefore, for investors to move cash from paper assets to hard assets.  Commodities will be reaping the rewards of this move for months and years to come.  And gold, the perennial safe haven of choice when central bankers become promiscuous at the presses, will lead the commodities pack on the way up.

How should we react then when gold closes down by almost $15.00?  Clearly this is not the time for precious-metals pessimism or groaning.  You should view such an event the way a market technician views it – as a period of profit taking and consolidation.  Even though you want to accumulate gold for the long haul, you should realize that professional traders are being opportunistic and looking for short-term profits.  In the most aggressive bull market, there are always breathers, just as in an auto race there are always pit stops.

The professional gold buyerknows this, looks at the fundamentals and then takes advantage of the pit stops on the way up.  The lay gold buyer sweats the small stuff, and tries to time the market or nab the perfect price.  What’s a “perfect price” though -- $34 per ounce just after President Franklin Roosevelt’s executive order to buy all gold from US citizens? Or are youlooking for $287 per ounce – the price of gold a few days after Y2K? 

The point is that it’s naïve or simply stubborn to leave money on the table because you yearn for an opportunity that could have been, and so choose not to act at all.   Do you really need a ticket with a clearly market destination (say $3,500 per ounce) – or, in this case, the guarantee of a particular profit at the end of the line? 

If you wanted that sort of financial arrangement, you would have bought a bond.  But just the other day you were privy to a startling revelation from the world’s king of bonds, Bill Gross of PMCO in Newport Beach.  Gross is now counseling investors to buy gold instead of bonds.

So where do we go from here when we buy gold?  Well, with the Fed manning the presses, a $2,000-per-ounce price for the yellow metal looks pretty good from where we now sit in the market.  And many are predicting it to head to $3,500 from there.

But if you buy gold now, you’ll have its fundamentals on your side.  And you’ll also have its history on your side.  Or, you could choose not to buy gold at all right now.  But if gold goes to $2,000 per ounce and beyond, maybe it’s time to remind yourself of the meaning of the phrase, “opportunity cost.”  Here’s a hint:  “opportunity cost” is the economist’s definition of the road not taken.  You chose not invest in gold so that you could invest in something else, or not invest in anything at all.  Good luck with that one.

Published in From The CEO

The stock market, along with the precious metals scene, has definitely started to climb its way back out of the massive hole that was dug after the financial crisis of 2008. While there is still a long way to go in a slow recovery process, one thing that has been catching on with many investors is precious metal IRAs. This is a great way to not only strengthen your portfolio, but to also diversify it and allow it to grow in a faster and more unique way than ever before.

Positive-Pullback

Most will tell you that there really is no “sure thing” when it comes to investing. However, precious metal investment is widely regarded as a “defensive asset,” that may provide a level of safety for your principal during uncertain times. In other words, at the very least, investing in a precious metals IRA will provide you safety against other outside investments and will also work to protect your money.

Why Precious Metals in an IRA?

When most think of precious metals they think of long-term value. While there is always that chance to make money quickly with precious metals, the fact of the matter is that most investors use it to grow and build, especially since over time it has proven to be one of the best ways to build wealth because the value continues to rise.

Unlike bonds, annuities, stocks and savings accounts, precious metals (gold, silver, palladium, platinum, etc), usually do not rely on the performance of other institutions to remain valuable. This is particularly true with gold. Owning physical gold (gold coins or gold bars) in your IRA savings strategy is a great way to invest in something that is not only tangible, but will also continue to grow in a currently uncertain market.

IRA Approved Precious Metals

While precious metal IRAs are starting to become very popular, there are still certain guidelines as to what type of metal is allowed in a precious metal IRA. Here is a quick rundown of what is allowed when deciding to open a precious metal IRA.

Gold

  • Gold bars with a purity of 24 karat.
  • Gold bars must be hallmarked by a NYMEX- or COMEX-approved refiner.
  • Gold bars range in sizes from 1 ounce to up to 400 ounces.
  • Gold coins having a purity of 24 karat.
  • 22 karat US Gold Eagle.

Silver

  • Silver coins and bars with 0.999+ fineness.
  • 1 oz. US Silver Eagle, Canadian Silver Maple Leaf, and the Mexican Silver Libertad bullion coins.
  • 100 oz. and 1000 oz. silver bar sizes.
  • Pre-1965 bags of US silver coins.

Platinum and Palladium

  • Platinum and palladium coins of 0.9995+ fineness.
  • 1 oz. platinum coins.
  • Platinum and Palladium barsin sizes ranging from 1 oz. to 100 oz.
  • All platinum and palladium bars and coins must be from a NYMEX- or COMEX-approved refiner/assayer.
Published in IRA & 401k
Monday, 24 September 2012

Weak Commodities Cause Gold to Drop

After hitting a near seven-month high last week, gold finally dropped last week as broadly lower crude oil and grain prices prompted investors to take profits. This is the first time in a while that outside commodity trading has hurt the yellow metal, and while the drop was small, it was still a drop after gold had put on an impressive run over the last couple of months.

Traders agree that volatility could increase ahead of Tuesday's U.S. COMEX gold option expiration, while open interest in U.S. gold futures rose to a one-year high for a third straight session. This shows us that even with the drop, gold as a whole is still very strong.

Positive-Pullback

While the yellow metal may be showing some signs of fatigue because of so many weeks of price gains, the fact of the matter is that most investors have been waiting for this. While gold may indeed show some fatigue, it is still going to make a run at that $1,800 per ounce price mark before the end of 2012. Whether it gets there or not remains to be seen.

"There is no question that gold is consolidating its recent gains, but every dip seems to be bought," said Anthony Neglia, president of Tower Trading and COMEX gold options floor trader.

Spot gold was down 0.6 percent to come in at $1,762.20 an ounce earlier today. On Friday, gold hit a high of $1,787.20, just short of this year's peak of $1,790.30 reached on February 29. That peak was reached during the early months of 2012 when the yellow metal was breaking records.

U.S. COMEX gold futures for December delivery settled down $13.40 an ounce to come in at $1,764.60. Trading volume totaled around 150,000 lots, in line with its 30-day average. This according to preliminary Reuters data.

Despite Monday's pullback, the price of gold has gained more than 10 percent since Ben Bernanke and the U.S. Federal Reserve said it would buy $40 billion a month in mortgage-backed debt until the job market outlook improves substantially. That announcement was made earlier this month.

"A lot of (investors) bought ahead of the announcement, and now they're selling out again to lock in the gains," HSBC analyst Howard Wen said.

We will see how it plays out, but don’t be surprised if gold continues to remain strong and climb toward that $1,800 per ounce price mark.

Published in Gold Investing
Friday, 21 September 2012

Will Gold Move Even Higher Next Week?

Gold has been on a very nice run for over a month now, and according to what most investors and analysts think, the yellow metal should move even higher next week as we head into the last full week of September and gear up for October.

According to a new survey released by Forbes, most participants agreed that the price of gold would continue to make gains next week, as the latest round of quantitative easing is still helping to push the yellow metal upwards. Market participants in the survey include bullion dealers, investment banks, futures traders and technical-chart analysts. As you can see a selection of precious metals experts were used as part of the survey.

Positive-Pullback

Gold has really been on fire since mid August, as the yellow metal has made some tremendous gains. Gold rose from an August 15 low of $1,592.10 an ounce to a high so far Friday of $1,790. Much of this was first on expectations of easing from the Federal Reserve. However, this current round of easing was only finally put into place about a week ago, so others aspects of world news and economy has played a part in the recent success of gold.

Further gains were also made when policy-setters actually announced more accommodation. The European Central Bank and Bank of Japan are also undertaking bond-buying programs. All of this put together has equaled gold have a great run since mid August.

“Don’t fight the Fed–QE continues to push markets higher,” said Spencer Patton, chief investment officer for Steel Vine Investments.

There are of course people who don’t agree that the gold market will continue to push higher next week. Those who look for gold to soften next week point out that markets invariably run into some periods of consolidation or corrections, rather than citing anything they see as overtly bearish. This is a fair assumption. My argument would be that gold will land somewhere in the middle of all this. It may go up, but probably won’t skyrocket. Either way, the yellow metal is healthy and will continue to perform well.

“A modest correction is in order following the major rally over the past few weeks,” said Adrian Day, president of Adrian Day Asset Management. “I would not sell because the fundamentals remain positive; this is only a short-term pullback.”


Published in Gold Investing

Gold ended its trading session today fairly steady. While there was an initial drop in price of around $6.50, the yellow metal pulled back up and ended with only a slight loss, despite the continued strength of the dollar. After hitting high after high, and culminating with a 6.5 month high, the yellow metal has now eased up some and we head into the last part of the year.

December gold last traded down by $1.20 to come in at $1,770.50 an ounce. Spot gold was last quoted down by $1.50 an ounce to come in at $1,768.75.  December Comex silver last traded up $0.107 at $34.69 an ounce. Silver continues to roll.

Positive-Pullback

Gold and silver have both been on nice tears lately, and while the yellow metal did droop just a bit today, the fact of the matter is that it is still trading very high and it is standing up nicely against a currently strong dollar. The dollar is currently showing a lot of favor, so many investors are slipping away from precious metals for a minute to take advantage

"You get slower growth on the industrial side, people are kind of downbeat on the market right now, so you're getting a little bit of liquidation," said Phil Streible, senior commodities broker at RJO futures.

Streible said Treasury bonds and the dollar were being favored over the precious metals on Thursday as investor safe havens.

Plenty of outside news continues to affect the price of gold. China and Japan are currently battling one another over a small set of islands, and while this shouldn’t make a difference in the world of gold it does.

The highly anticipated HSBC China manufacturing PMI was released Thursday and came in at a reading of 47.8 in the latest month. This was the eleventh straight month of contraction in China’s manufacturing sector.

Asian stock markets fell on the China news, while raw commodity markets, including gold and silver, also saw some selling pressure due to the weak China data. The market place is also uneasy regarding a serious territorial dispute between China and Japan regarding ownership of a small chain of islands (as mentioned above).

We will see how gold finishes the week out, but all signs point to the yellow metal remaining strong heading into the last week of September and gearing up for the last few months of 2012.


Published in Gold Investing
Tuesday, 18 September 2012

Gold Moves Up on South Africa News

Gold struggled to figure out a clear direction today, as the yellow metal was up and down for most of the early trading period. While the yellow metal did end a bit higher than the previous trading period, it seemed as though investors wanted to take a breath after all the talk of the new stimulus deal from the Fed. A stronger dollar also fought with gold today some, stalling the metal early before it ended up higher. Striking miners in South Africa will return to work, which helped the yellow metal settle in higher.

Gold futures for December delivery rose by 60 cents, or less than 0.1%, to come in at $1,771.20 an ounce on the Comex division of the New York Mercantile Exchange. While the final price of the yellow metal only gained a bit of ground, it was still positive, and helped continue the streak of the yellow metal’s run into positive gains over the last few weeks.

Positive-Pullback

We may start to see a small stall in the yellow metal, simply because many investors and analysts agree that the market may need a short “breather” before prices start to go up again. This is a fair assumption, especially given the huge gains that the yellow metal has made over the last few weeks.

The U.S. Federal Reserve’s third round of quantitative easing could lead to higher interest rates and “dilute its effectiveness,” analysts at HSBC said in a note.

“Since the gold rally is heavily predicated on QE3, this could shift the market psychology to one of cautious consolidation after the spate of strong gains. We remain bullish but believe the market needs a ‘breather’ before moving higher later in the year,” the analysts said.

Other precious metals had mixed news today, as silver rose some but platinum and copper both saw drops in overall price, as is usually the case in these situations.

Most everyone who bought gold at a lower price earlier this year is now reaping some nice returns on investment. While some are choosing to sell off and take their gains, many others are still holding on to the precious metal in hopes that the price will start to march even higher toward the $2,000 per ounce price mark. This is not out of the question, though the yellow metal will be hard pressed to make that number before mid to late 2013.

Prices are still low enough that buying gold is still a great option, especially as a portfolio strengthener.

Published in Gold Investing

The blueprint regulators gave Barclays Plc (BARC) and other banks for correcting Libor-rate abuses may not be enough to salvage a benchmark so discredited it needs to be overhauled, some investors say.

The U.S. Commodity Futures Trading Commission ordered Barclays on June 27 to keep thorough records on how it comes up with its London interbank offered rate submissions and erect so- called Chinese Walls between traders and rate-setters. It also said lenders should expect random checks from regulators on whether their submissions reflect actual borrowing costs.

Investors say the proposals amount to little more than window dressing.

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“As long as banks are allowed in the henhouse, then the system is ripe for abuse,” said Tim Price, who helps oversee more than $1.5 billion at PFP Group LLP, an asset-management firm based in London. A better system would be to take random samplings from all the transactions, he said. “If there is any message of the last few years, it’s that banks and bankers simply cannot be trusted.”

Barclays, the U.K.’s second-largest lender, was fined a record $451 million and its top executives agreed to forgo bonuses after investigators found traders and senior managers “systematically” tried to rig the Libor and Euribor, its equivalent in euros. With other lenders facing similar sanctions, the British Bankers Association, which oversees Libor, is under pressure to prove the rate serves a purpose.

‘Big Boy’

Libor is determined by banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because banks’ submissions aren’t based on real trades, the potential exists for manipulation by traders. At least a dozen firms are being probed by regulators worldwide for colluding to rig the rate, the benchmark for $500 trillion of securities, including mortgages, student loans and swaps.

Barclays employees overseeing Libor and Euribor submissions routinely accommodated requests that benefited traders at their own and other banks, the CFTC said.

On Sept 13, 2006, a senior Barclays trader in New York e- mailed the person who submitted the rate, “Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the lib or fixing at 5.39 for the next few days. It would really help,” according to a CFTC document.

In another exchange, from April 7, 2006, a submitter responded to a request for low U.S. dollar Libor submissions from a swaps trader with “Done ... for you big boy,” the commission said.

Shares Fall

Barclays fell 16 percent in London trading yesterday, the most in more than three years, as U.K. lawmakers put pressure on Chief Executive Officer Robert Diamond. Prime Minister David Cameron said that the bank has questions to answer, while Ed Miliband, leader of the opposition Labour Party, has demanded a criminal investigation. Shares in Royal Bank of Scotland Group Plc (RBS), which is also being investigated for suspected Libor manipulation, dropped 11 percent.

As part of its settlement, the CFTC ordered Barclays to amend how it sets Libor. Submissions should be based on actual trades if possible. Where no trades have taken place, the rate- setter can consider factors including how much competitors paid to borrow and market conditions, the CFTC said.

Rate-setters should be prohibited from “improper communications” and not work within earshot of derivatives traders, according to the commission. Barclays must keep extensive records on all its Libor submissions, including details on who the rate-setter was and how the figure was derived. The bank must also undergo annual audits and be willing to provide data to regulators on demand.

‘Proper Baseballs’

The CFTC requirements will provide a blueprint for what might be required of other banks once the BBA completes its review, said Owen Watkins, a former regulator at the U.K.’s Financial Services Authority.

“You’ve got to have everybody playing the game by the same rules,” said Watkins, now a lawyer at Lewis Silkin LLP in London. “It’s like playing baseball with some guys throwing proper baseballs, while some guys throw golf balls.”

The Barclays settlement has “extremely serious implications, which need to be carefully considered,” the BBA said June 27 in an e-mailed statement. “The investigation findings will be fully included in the current review of Libor.”

‘Trust Me’

Joseph Eyre, a spokesman for the U.K.’s Financial Services Authority, which levied the fine against Barclays along with the CFTC and the U.S. Justice Department, said “the BBA’s review is continuing and we will consider any recommendations arising from that exercise.”

The proposals may not go far enough, said Rosa Abrantes- Metz, an economist with Global Economics Group, a New York-based consulting firm, and an associate professor at New York University’s Stern School of Business.

“You will have some unease going forward if they do not impose some drastic changes,” said Abrantes-Metz, the co-author of a 2008 paper on Libor manipulation. “We need to have Libor reflect true borrowing costs and I just don’t see any more efficient way to do so but to base it on actual borrowing costs.”

The market isn’t going to settle for “the trust-me approach,” said Ron D’Vari, CEO of New York-based advisory firm NewOak Capital LLC and a former BlackRock Inc. (BLK) managing director. “Changing wheels while driving is tough, but it has to be done.”

Steering Committee

Diamond has agreed to appear at a meeting of U.K. lawmakers to highlight “what we have done and are doing to put things right,” he said in a letter yesterday to Andrew Tyrie, chairman of Parliment’s cross-party Treasury Committee.

“I appreciate that the nature of the settlements disclosed yesterday raises many questions, and I welcome the opportunity to provide answers,” Diamond wrote.

The BBA, which has overseen Libor for 26 years, created a steering group of bankers and regulators in March to consider reforms in light of the probes. The BBA was aware that banks including Barclays were low-balling their Libor submissions during the financial crisis to avoid the perception they were struggling to borrow cash, according to CFTC documents.

In an April 2008 phone call, a senior Barclays manager told a BBA representative, “We’re clean, but we’re dirty-clean, rather than clean-clean,” according to the CFTC report. The BBA employee responded, “No one’s clean-clean.”

Incremental Changes

Barclays is on the BBA steering committee reviewing Libor. The bank’s chairman, Marcus Agius, is also chairman of the BBA. Other lenders on the steering committee include Credit Suisse Group AG (CSGN), HSBC Holdings Plc (HSBA), Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland, all of which are being investigated as part of Libor probes. Spokesmen for the banks declined to comment.

Three members of the steering committee interviewed by Bloomberg News this month said changes to Libor would be incremental because structural modifications in how the rate is calculated could invalidate trillions of dollars of contracts and result in litigation. They ruled out stripping the BBA’s oversight and scrapping the survey system in favor of a rate based entirely on actual trades.

“You wouldn’t ask for someone’s opinion on the closing price of a share when there is an actual price available,” said Daniel Sheard, chief investment officer of GAM U.K. Ltd., which manages about $60 billion in assets. “What better way to restore credibility than having a transaction-based index?”

‘Significant Resources’

The British government will emphasize to the BBA at the steering group’s next meeting that only drastic changes will suffice, according to a person with knowledge of the matter, who asked not to be identified because the talks are private. Chancellor of the Exchequer George Osborne, speaking to lawmakers in London yesterday, said the FSA is “committing significant resources” to investigate “systemic failures” over the manipulation of Libor.

PFP Group’s Price said he’s skeptical that the BBA review or increased oversight by regulators will improve Libor.

“Whenever you’ve got a regulator battling against well- paid bankers, we know who’s likely to win,” Price said. “I would feel better if some completely independent body was just compiling data from the banks and just spitting out a number.”

Published in United States Economy
Thursday, 28 June 2012

Gold Rallies on Euro Bank News

Gold rallied today to finish the weekend over $1,600 per ounce heading into the weekend. News that European Union banks will get some help was very interesting to most, as investors will now sit back some over the weekend and see how the yellow metal reacts to being back over the $1,600 per ounce price mark.

Prices were higher overall for today and overall for the week. The most-active August gold contract on the Comex division of the New York Mercantile Exchange rose Friday, coming in at $1,604.20 an ounce and up and overall 2.38% on the week. September silver also rose Friday, coming in at $27.612 an ounce to slide in at an overall increase of 3.32% on the week.

It is tough to say what they precious metals market may do next week. However, at the very least it should be very interesting. Many investors think that the overall price of gold may have a good chance of staying over the $1,600 per ounce price range. That of course is dependent on what continues to unfold in the Euro zone, as that news seems to be trumping just about everything else right now.

Positive-Pullback

“I see this (EU news) supporting markets for a while. The market rally may eventually fizzle out, but I see this lasting a bit long, at least until August when the markets will demand a bit more action…. It wasn’t everything they wanted, but net-net I see metals higher next week,” said Edward Meir, a commodities consultant with INTL FCStone.

For now gold may be stuck in the $1,540 - $1,620 range. However, we all know that this is just an educated guess, as even the best experts may have a tough time predicting exactly where the yellow metal will end up over the next couple of months.

It is safe to say that at the very least gold will act as a safe haven for investor money, especially in the wake of the current Euro happenings. While that area of the world continues to come along, it is coming along slowly, and many investors are still very hesitant to make moves without knowing a concrete outcome.

“Given the euro zone weak economic fundamentals and the potential for a rate cut at next week’s ECB (European Central Bank) meeting, we expect the euro to remain under pressure,” said Brown Brothers Harriman analysts.

We will see what develops next week so stay tuned.

Published in Gold Investing

European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts and insurance ended, boosting crude prices and pressure on the Persian Gulf nation to halt its nuclear- enrichment program.

The reduction in Iranian exports may become the biggest supply disruption from a member of the Organization of Petroleum Exporting Countries since an armed rebellion all but halted pumping in Libya last year, according to the International Energy Agency. It also comes as a strike by Norwegian workers is curbing flows from North Sea fields.

“We expect Brent oil prices to be supported by Iranian oil sanctions and potential loss of supplies from the North Sea,” Gordon Kwan, the head of regional energy research at Mirae Asset Securities based in Hong Kong, said in a June 28 report. “The imminent EU insurance ban on tankers carrying Iranian crude could drive up demand for Brent and Dubai crude.”

Positive-Pullback

Brent futures fell below $90 a barrel on June 21 for the first time in 18 months as concern that Europe’s debt crisis would spread sapped the outlook for fuel use worldwide. Now, the Iran embargo and Norwegian strike are stoking speculation about a rebound in prices, according to analysts such as Kwan and Ole Hansen at Saxo Bank A/S. Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange.

Unsold Barrels

Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report.

Mohammad Ali Khatibi, Iran’s governor to OPEC, warned yesterday that the EU would bear “the consequences of politicizing the market,” without specifying what he meant, the state-run Iranian Students News Agency reported.

Mahmoud Bahmani, Iran’s central bank governor, said his nation “isn’t sitting by idly” and has a “very suitable” $150 billion in foreign currency reserves to help weather the latest trade and financial curbs. “We have programs to fight the sanctions, and we will confront hostile policies,” Bahmani said yesterday, according to the state-run Mehr news agency.

Emergency Meeting

Iran urged OPEC to call an emergency meeting to address the group’s production in excess of its targeted 30 million barrels a day, Mehr reported June 30, citing Oil Minister Rostam Qasemi. Disregard of the limit by some OPEC members “will negatively impact oil prices in the international market,” Qasemi said. The 12-member organization, which decided on June 14 to retain its daily ceiling of 30 million barrels, pumped about 1.6 million barrels more than that in May, according to data compiled by Bloomberg.

The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out today.

Foreign ministers from the 27-nation bloc decided on June 25 the exemptions shouldn’t be extended after talks between Iran and the world’s powers about the nuclear program failed to reach a breakthrough since they started in April. Iran denies that it is developing nuclear weapons.

‘Toughest Measures’

“These are the toughest measures the EU has adopted against Iran to date,” U.K. Foreign Secretary William Hague said yesterday in a statement. “It is in the power of the Iranian leadership to end Iran’s current isolation, but unless they change course, the pressure will only increase.”

The EU ban on insurance for ships carrying Iranian oil affects 95 percent of the world’s tankers because they’re covered by the 13 members of the London-based International Group of P&I Clubs, which is adhering to the EU rule.

In an effort to retain an important Asian customer, Iran offered to supply oil to South Korea using its own tankers, a government official in Seoul said June 29, asking not to be identified because the matter is confidential.

Complementing the European sanctions, a U.S. law enacted Dec. 31 cuts off international banks from the U.S. financial system if they settle oil trades with Iran. The U.S. rule gave importing nations, including China, India and Japan, until June 28 to demonstrate they had “significantly reduced” their purchases of Iranian oil in order to qualify for exemptions.

Crude Dependence

Oil and its derivatives account for nearly 80 percent of Iran’s exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country’s 2010 net oil export revenues at $73 billion.

Iran’s oil exports may “gradually” decline by 20 percent to 30 percent after sanctions start and amid field maintenance work, Deputy Oil Minister Ahmad Qalebani said on June 26.

Such acknowledgement hasn’t erased tensions over the sanctions. Iran warned it can strike any target in the Strait of Hormuz and the Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), Mehr reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Gulf though the Hormuz chokepoint.

Iranian ‘Playground’

“The Strait of Hormuz and the Persian Gulf is Iran’s playground and no one else’s,” Mehr cited Admiral Ali Fadavi as saying. “Any issues related to the Strait of Hormuz will be a very big story that will have consequences on the price of oil.”

A survey of 42 analysts on June 28 showed that 16, or 38 percent of them, predicted crude futures will increase in the week starting today, citing the new sanctions. Among the remainder, 12 forecast little change in prices and 14 expected a decline.

“That is the wildcard, the Iranian situation,” Torbjoern Kjus, an oil analyst at Oslo-based bank DnB ASA, said by phone on June 29.

“Nobody can be totally certain how it’s really going to affect the market,” he said. “There’s probably been huge inventory builds in Iran, and this could pose a bearish effect for next year or the second half of this year if there is a resolution.”

Published in World Economy
Monday, 17 September 2012

Gold Stays Flat After 6-Month High

Gold has been on fire as of late, and after the recent announcement by the Feds that another stimulus package is on the way, the yellow metal was bumped even higher. However, gold took a breather today, staying flat following the first trading day since the yellow metal hit a six-month high in price. Many analysts agree though that resilient bullion demand following the U.S. Federal Reserve's stimulus suggests the metal has room to rise further.

Gold was pretty flat Monday, rising only 31 cents to come in at $1,769.77 an ounce. This was after rising a full 2 percent last week and hitting that six-month high.

Positive-Pullback

Gold was able to inch up Monday after the Fed last week unleashed a third round of bullion-friendly bond-buying known as quantitative easing (QE). This lifted the traditional inflation hedge to a fourth straight week of gain for the first time since January. All good signs if you are a gold owner

"Using QE2 as guidance for potential gains for gold prices, gold is likely to have priced in the bulk of its move higher," said Suki Cooper, precious metals analyst at Barclays Capital.Cooper said that, however, a pick-up in physical demand in China and India and record-high holdings in gold-backed exchange-traded products suggest the metal is likely to hold onto its recent strength.

As we all know, China is still buying up gold at will, and while the gold intake in India is down some (allowing China to become number 1), the fact of the matter is that India still holds a huge amount of gold.

The yellow metal has gained around ten percent since the beginning of August, which is a huge amount when you consider how flat the yellow metal was after February of 2012. "The market has to consolidate the gains it has made since the end of August," Peter Fertig, a consultant for Quantitative Commodity Research, said.

We will see how the most recent Fed stimulus plays out in the long run. I still think it is only a temporary fix, but others may see it differently. The current stimulus package may stay in place for a while. A recent poll showed the Fed will buy a total of $600 billion of bonds under its new stimulus program and will look for a U.S. unemployment rate of 7 percent before it halts the program.


Published in Gold Investing